When building a life with someone, the last thing on your mind is what might happen if things fall apart. However, being prepared doesn’t mean you’re planning for failure. Proactively protecting what matters to you and your partner can be a responsible decision in some circumstances.
In New Zealand, a prenuptial agreement is known as a contracting out agreement (or more commonly referred to as a “prenup”). It offers couples a way to control how their property will be divided in the event of separation or death. Let’s explore its benefits and what it may look like in practice.
What is a Contracting Out Agreement?
A contracting out agreement, or prenup, is a legally binding document that allows couples to sidestep the default 50/50 property split dictated by the Property (Relationships) Act 1976.
Without such an agreement, the law generally assumes that all property acquired during a relationship will be divided equally after three years of living together. This includes the family home, shared assets, and income-related savings and investments. For those with complex financial lives, this default rule might not reflect what feels fair or appropriate. A well-drafted agreement provides an alternative path based on mutual understanding.
Who Needs a Prenuptial Agreement?
Contracting out agreements are not reserved for the ultra-wealthy or those entering marriage for a second time. Many couples now choose to enter relationships later in life, often with significant personal assets, debts, businesses, or responsibilities from previous relationships.
You might want to consider a contracting out agreement if you:
- Own property or a business before entering the relationship.
- Are contributing more financially (for example, putting up the deposit for a shared home).
- Have children from a prior relationship.
- Simply want clarity and transparency with your partner from the beginning.
Holding these discussions may feel awkward, but they do not signal mistrust. When both parties approach with good faith, prenups are a commitment to fairness and openness.
What Makes an Agreement Legally Valid?
For a contracting out agreement to be enforceable, it must meet strict requirements:
- It must be in writing and signed by both partners.
- Each person must receive independent legal advice from separate lawyers.
- Those lawyers must witness the signing and certify that they explained the implications of the agreement.
The need for separate legal advice ensures that both parties fully understand their rights and are entering the agreement freely. Without these safeguards, the agreement may be inequitable and unenforceable.
What Can You Include in the Agreement?
A contracting out agreement can cover a broad range of financial matters, including:
- Ownership of specific assets, such as a house, business, or inheritance.
- Treatment of debts and liabilities.
- How future property acquired during the relationship will be treated.
- Financial arrangements if the relationship ends or if one partner passes away.
In New Zealand, however, there are limits. The agreement does not cover custody of children or nor can it restrict certain future legal claims such as those made under the Family Protection Act upon death or claims for financial support on separation (ie spousal maintenance). An experienced family lawyer can help create a compliant and fair asset plan.
Can a Prenup Be Overturned?
Yes, while the courts tend to respect properly executed agreements, they can still be challenged and set aside in some circumstances. This can happen if:
- Giving effect to the agreement would cause serious injustice, particularly in light of changed circumstances.
- One party didn’t understand the agreement, was pressured into signing it, or didn’t receive proper legal advice.
- The required legal formalities were not properly followed.
This is why careful preparation, transparency, and regular reviews are essential. What seems fair now might not seem fair in 10 years, especially if children, illness, or major financial changes come into play.
Common Pitfalls and How to Avoid Them
A contracting out agreement is only as robust and thorough as the care taken in preparing it. Common issues include:
- Leaving it too late: Try not to draft an agreement just before a wedding or moving in together, as timing may affect the agreement’s enforceability. Rushing into one can also open the door to errors or snap judgments.
- Incomplete financial disclosure: Both parties must be open about all assets and debts. Concealing information can undermine the agreement.
- Forgetting to update: If your financial situation changes significantly, it’s wise to review and – if appropriate – amend the agreement. Selling a property and receiving an inheritance are two common scenarios that change relationship dynamics.
Prepare for the Future with Sharon Chandra
Planning a future together is an exciting step, but it’s also a time to think carefully about protecting what matters most. A prenuptial agreement, known in New Zealand as a contracting out agreement, can help couples set clear expectations around property and finances from the outset. Whether you’re entering a new relationship with existing assets, combining families, or simply wanting clarity for the road ahead, seeking independent legal advice can provide valuable peace of mind. Sharon Chandra is a trusted family law specialist with extensive experience helping New Zealanders objectively navigate relationship property matters. Get in touch today for personalised guidance on preparing a prenuptial agreement that supports your future.